Global solar, wind and battery prices drop sharply – BNEF

New research from BloombergNEF (BNEF) has shown that solar photovoltaic (PV) and onshore wind are now the cheapest sources of new-build generation for at least two-thirds of the global population.

Meanwhile, battery storage is now the cheapest new-build technology for peaking purposes of up to two-hours of discharge duration in gas-importing regions, such as Europe, China and Japan. Up to now, gas-fired power stations have long been the de facto peaking technology in many countries, given the dispatchable nature of the energy they generate.

To arrive at these conclusions, BNEF analysts used information on 7,000 energy projects across 47 countries which started construction over the last six months. The firm’s analysis shows that the global benchmark levelised cost of electricity (LCOE) for onshore wind and utility-scale PV generation has fallen by 9% and 4% since the second half of 2019 – to $44 and $50/MWh, respectively.

At the same time, the benchmark LCOE for battery storage has tumbled to $150/MWh – a reduction of one half compared to two years ago. Onshore wind has seen its most significant drop in costs since 2015, mainly due to a scale-up in turbine size, now averaging 4.1 MW.

Best-in-class onshore wind projects can be found in Brazil and the US, with LCOEs of $24 and $26/ MWh respectively, excluding subsidies such as tax credits. For solar PV, a new benchmark LCOE of $38/MWh has been achieved in China. BNEF attributes the fall to a rapid uptake in better performing monocrystalline modules. New-build solar in China is now almost level with the running cost of coal-fired power plants, at an average of $35/MWh.

This is significant, as China advances on its deregulation agenda, opening up competition in the power sector. BNEF predicts LCOEs as low as $23–29/MWh could be possible, assuming competitive returns to investors.

Tifenn Brandily, lead author of the report at BNEF, says that part of the dramatic improvements in the cost-competitiveness of solar and wind are due to the technologies getting better at extracting renewable resources.

‘But our analysis also suggests that since 2016, auctions are forcing developers to realise cost savings by scaling up project size and portfolios,’ Brandily adds. Larger scale enables them to slash balance-of-plant, operations and maintenance expenses – and have a stronger negotiating position when ordering equipment.’

The data used for the latest report came from actual deals over recent months, and therefore did not reflect what may happen to the LCOEs of different generation technologies as a result of the COVID-19 pandemic.

‘The coronavirus will have a range of impacts on the relative cost of fossil and renewable electricity,’ predicts Seb Henbest, Chief Economist at BNEF. ‘One important question is what happens to the costs of finance over the short and medium term. Another concerns commodity prices – coal and gas prices have weakened on world markets. If sustained, this could help shield fossil fuel generation for a while from the cost onslaught from renewables.’